465 F.Supp.3d 797
M.D. Tenn.2020Background
- Plaintiffs Scott Stevenson and BiotronX (a lab-instrument repair business) negotiated with Tech One and its president Matthew Mincer about Tech One buying BiotronX or its inventory while Stevenson began working for Tech One.
- Biocare awarded Tech One a service contract for the Autostainer and Nemesis instruments; Stevenson (the only Tech One technician with relevant experience) learned Tech One had negotiated the contract without him.
- Mincer allegedly told Stevenson Tech One would buy BiotronX’s parts inventory and asked Stevenson to disassemble ten intact instruments and discard body panels/chassis so Tech One would receive only parts.
- Parties discussed price (Stevenson alleges conversations indicating $250,000 in cash, later a $142,000 accountant valuation), but no signed writing was executed; Stevenson dismantled instruments in reliance on Tech One’s promise.
- Tech One later refused to purchase the inventory, Mincer fired Stevenson, and Plaintiffs sued for breach of contract (oral sale of goods), promissory estoppel (detrimental reliance), and promissory fraud.
- Court granted defendants’ motion to dismiss the oral breach-of-contract claim under the UCC statute of frauds but denied dismissal of promissory estoppel and promissory fraud claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the oral sale-of-goods contract is enforceable under UCC § 2-201 | Parties formed an oral contract for sale of parts; Plaintiffs partially performed by dismantling instruments | Statute of frauds requires a signed writing for goods ≥ $500; no writing here | Court: Oral breach-of-contract claim dismissed under § 2-201 (statute of frauds) |
| Whether the “specially manufactured” or partial-performance exceptions save the oral sale | Dismantling made parts unsuitable for sale to others, invoking UCC exceptions/partial performance | Plaintiffs did not plead facts showing parts were ‘‘specially manufactured’’ or otherwise within exception | Court: Plaintiffs failed to show parts were specially manufactured or invoke an exception; exception not met |
| Whether promissory estoppel is barred by the UCC statute of frauds | Promissory estoppel is an equitable, independent remedy that can avoid the statute of frauds where detriment is shown | UCC writing requirement bars enforcement of oral promises for sale of goods | Court: Tennessee would likely follow majority rule allowing estoppel to avoid UCC writing requirement; promissory estoppel survives pleading challenge |
| Whether promissory fraud (fraudulent promise) is barred by statute of frauds or inadequately pleaded under Rule 9(b) | Plaintiffs alleged promissory fraud (promise made without intent to perform) with circumstantial facts showing intent not to perform | Defendants say statute of frauds bars the tort claim and fraud allegations lack particularity required by Rule 9(b) | Court: Statute of frauds does not bar promissory fraud (fraud is a tort); Rule 9(b) satisfied as to time/place/content and circumstantial intent allegations; claim survives |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility pleading standard governs Rule 12(b)(6))
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading must permit reasonable inference of liability)
- S & P Brake Supply, Inc. v. STEMCO LP, 385 P.3d 567 (Mont. 2016) (promissory estoppel may avoid UCC statute of frauds)
- Chavez v. Broadway Elec. Serv. Corp., 245 S.W.3d 398 (Tenn. Ct. App. 2007) (promissory estoppel is an equitable doctrine independent of contract)
- BPI Energy Holdings, Inc. v. IEC (Montgomery), LLC, 664 F.3d 131 (7th Cir. 2011) (majority rule: statute of frauds is defense to contract claims but not to torts such as promissory fraud)
- Alden v. Presley, 637 S.W.2d 862 (Tenn. 1982) (limits of promissory estoppel include substantial, foreseeable, and reasonable reliance)